The Best Year-End Process Ever

Year-end is a busy time for accountants and bookkeepers. It is made even more hectic when your firm is lacking clear systems and processes. How do you ensure that every I is dotted and every T is crossed? How can you be certain that nothing slips through the cracks? That is why Polymath, LLC created the Year-End Wrap-Up routine, also lovingly known as the YEWU.

We’re going to introduce you to our YEWU process. We hope that you may find some useful gems to help you create or add to your firm’s Year-End Wrap-Up routine. Together, we are making the world a better place, built on a foundation of thriving small businesses.

Time for Some Fun!

Our darling Penny the Practical Professional thinks that a YEWU is a magical creature that is half-yeti and half-emu. She believes that the YEWU comes around only once a year to bring presents to all the good business owners who filed their payroll forms and 1099’s on time, and whose QuickBooks are in order for taxes without needing an extension.

In fact, YEWU stands for Year-End Wrap-Up. It’s the process we go through at the end of each year with all of our clients to make sure that their 1099’s and W2’s get done on time. We also ensure that their books are all clean and ready for their tax accountants.

Introducing the Polymath YEWU

The Year-End Wrap-Up process with every client at Polymath begins with scheduling appointments with EVERYONE. In the months of November and December, we meet with every single client on our list. Then, we get to figure out who has been naughty and nice!

We use a Google spreadsheet called the YEWU Checklist to track our progress for all clients in one central location. The YEWU checklist is shared with our whole team on our Google Drive, so we can all make changes and updates to it in real time.

From the moment we first start making phone calls to schedule our Year-End Wrap-Up appointments, every action is tracked on this form. We know the last time the client got a scheduling call, whether the appointment is booked or needing a follow up, and the Polymath team member that needs to meet with that client for the best possible result.

We have the clients rated into three priority groups. Priority 1 includes the clients that may be difficult to schedule, or that often require more than one YEWU appointment. Priority 3 is the clients who we could probably forego the appointment and still be fine, but we still want to make sure we meet with everyone. The Priority 2 clients are everyone in between.

The YEWU Mantra

There is a phrase that keeps us calm through the hectic Year-End Wrap-Up season. By repeating this phrase in our minds any time things get rushed, we are able to move forward with patience, grace and positive communication.

"Dear client, your poor planning and even poorer communication do not constitute an emergency on our part."

If a client decided to put off their books all year just to have them on fire NOW because they need to get their forms out at the end of January, that is their problem. We are happy to help them with their problem as best as we are able, given the reasonable time and resources available. That does NOT make it our problem.

We educate, we serve and we hold good boundaries. If that doesn’t work for the client, then maybe we’re not the best fit for each other’s needs. If the client doesn’t want to show up to their own ball game, we can’t make them. That’s when we let them go and focus on the clients that are accountable.

The YEWU Meeting Agenda

Once in the meeting with the client, we have one to two hours to go over A LOT of detailed and important info. We do a full proofread of the clients books. We want to make sure that all of the transaction data is correct with the client. This ensures that Polymath and the client are on the same page, rather than assuming that everything is being entered correctly. We keep an eye out for a few very essential things:

We run a Profit and Loss and Balance Sheet with the Prior Year Comparison columns to do a quick review of Sales, KPI’s (Key Performance Indicators), Net Income, Cash, Liabilities and Quick Ratio. We want to see how the year we are finishing compares to the prior year. Then, we can celebrate wins, or give feedback, as appropriate.

Next, we review the P&L Detail. We make sure that each transaction is categorized correctly and that all transactions have Payees, particularly if it is a transaction that may warrant that vendor a 1099.

On the Balance Sheet, we make sure to do a transaction detail review for fixed asset accounts, particularly for property improvements that may need a 1099.

We make sure to review Undeposited Funds and Unbilled Expenses for outstanding transactions that need to be cleaned up. Often, duplicate transactions will hide out in these areas.

Then, we run the Accounts Receivable and Accounts Payable aging reports with the client, and ensure that those balances are correct. We encourage the client to write off any uncollectable bad debts, and educate them on strategies to collect on their receivables more consistently.

Next, we review the payroll liability accounts, ensuring that the balances are correct and that there are no miscategorized transactions pointing to these accounts.

1099 Payee Pitfalls

Once we know that the transactions are categorized correctly and that everything has a payee, we dive in to see which vendors may need a 1099. As accountants, you know that there are a myriad of things that can go wrong in 1099 reporting.

For example, that restaurant down the street uses your client’s services as a customer, and they also cater your client’s holiday party. The transaction got entered under the customer name, so it’s not showing up on your 1099 report. Oops!

Also, that client’s employee owns their own lawn care business, and has been maintaining the company’s landscaping as a vendor, but your client has been putting those checks under the employee’s name, rather than their business name, in the vendor list.

What if a vendor’s name is duplicated, and transactions are spread across multiple vendors? This can result in some amounts being left off a vendor’s 1099. Depending on how the numbers fall, it could also make it so that the vendor erroneously falls under the 1099 threshold.

Finally, imagine that your client’s staff member was entering a customer refund check and entered the customer as a vendor and incorrectly categorized the transaction. Now, you and your client are trying to hunt down W9 info for someone who does not need a 1099. That is a waste of valuable time and resources.

These mistakes can result in costly fines, if missed. That is why it’s important to review the customer, vendor and employee lists with the client, and bring up stories of scenarios like these. This will allow your client to give you a heads up about any name crossovers. You can use that same opportunity to clean things up by marking unneeded names inactive.

Foolproof 1099 Reporting

The 1099 reporting tools in QuickBooks® Online Plus are pretty snazzy. Nonetheless, I have found another process that enables us to more accurately ensure that no transaction gets missed. We really like being able to use the same routine for all of our clients, so jumping through the hoops to set up the 1099 mapping in Plus, while having to figure out a workaround in the other versions, is not our favorite. We have grown to LOVE our routine.

Once you have checked out your payee lists and made sure that the transaction data looks good, the report to use is the Transaction List by Vendor. Be sure to customize the report to include the "Split" column. At Polymath, this report is known as the TLBV.

The TLBV shows us just about everything. We can see who got paid, how much, for what and which account it was paid from. Export that baby to excel, and we’re ready to play! Delete the vendors that don’t qualify. Then, remove the transactions that were paid by PayPal or credit card. Finally, remove the vendors that didn’t make the threshold. You are left with a detailed spreadsheet of the vendors that may need a 1099.

We announced in our November newsletter that all 1099 relevant vendor info needed to be given to us no later than January 10. Any later than that, and we do not guarantee that the forms will go out on time.

Our long-term clients have gotten well trained on getting W9’s filled out by their vendors BEFORE they send them payment. Newer clients can take some time. We want to make sure to get them their list of potential 1099 recipients as early as possible. By preparing their preliminary Transaction List by Vendor with them in November or December. and including vendors that have not yet met the threshold, we allow plenty of time for them to get the necessary info from all vendors who might need a 1099. The result: no more waiting on clients for their vendor info.

Wrapping Up the Year

We continue to use our YEWU Checklist spreadsheet all the way through the Year-End Wrap-Up process. We note how many W9’s we need from each client and how many we have received. There are separate columns for the 1099 pertinent reconciliations and the accounts that can get done later. We make sure that the year-end statement for each account is available to the tax accountant, along with the reconciliation report that reminds them that they are working with the best. We even have a column that tracks which tax accountants we have received adjusting journal entries from, which enter those themselves, and the ones we need to follow up with.

It is a thing of nerdy bookkeeping beauty.

Fun Tools for You to Play With!

It is up to each firm to determine the most effective systems and processes for themselves and their clients. Nonetheless, hearing what our colleagues are doing and seeing their systems can often help us to evolve and grow. Please click here to get your free copy of our YEWU Meeting Agenda and our YEWU checklist. Adapt them to your needs, and enjoy clear, consistent, streamlined processes for your team to follow.

The result is a stress-reduced year-end for our clients and for us, and more profitable businesses all around! Together, we are making the world a better place, built on a foundation of thriving small businesses. Thanks for saving the world, one small business at a time.

About the Author

Ingrid Edstrom

Ingrid is a bookkeeping nerd and CEO of Polymath. She loves taking a topic that most small business owners put on a scale from boring to terrifying and turning it into a fun and rewarding part of entrepreneurship. Ingrid is the creator of the Ask A Bookkeeper puppet show, founder of the Southern Oregon Bookkeepers Association, and leader of the Southern Oregon Woodard Group.